NEWS FLASH! IRS CHANGES POSITION ON DOMESTIC PARTNERS

They just sent out an eTax Alert about a new IRS Private Letter Ruling that will astonish and astound you!

In 2007, TaxMama explored the Federal tax issues faced by same-sex partners if they become registered domestic partners or got married, in those states that permitted same-sex marriage. The problems faced are huge - with two separate IRS tax returns that split the income and deductions based on the SINGLE person's ownership, earnings, etc. Gift taxes raised their ugly head. And the nightmare of the exemptions, credits and head of household issues when children were involved! Often the person earning all or most of the money got none of the tax benefits. While the person earning little, or being a stay-at-home parent, might have been the one entitled to the benefits - with no earnings to absorb the deductions or credits.

Enter PLR PLR-149319-09 (which is not online in the public domain yet) . IRS Tells Registered Domestic Partners to Follow State Community Property Laws.

In short, IRS now says that registered domestic partners in community property states may split income and withholding 50/50. And they can skip filing gift tax returns for the support provided from one partner to another.